The objective of this study is to develop an upscaling methodology for simulation of oil-water displacement in fractured porous media. The "real response" is determined from 2-D fine grid models that explicitly incorporate given fracture distributions. The fine-grid models are used to determine equivalent properties of the fractured systems, which, when included in conventional double porosity models, will result in a behavior similar to the fine-grid response. The upscaling methodology is based on flow simulation with constant pressure and constant flux boundary conditions. The upscaling parameters of each equivalent double-porosity grid are determined by matching results of the fine grid simulation. The effects of some important factors such as the grid size of the upscaled model, injection rate, and well location are examined to test the generality and accuracy of the upscaling methodology.